Companies that try to be all things to all customers are sure to fail. Here's a business guide from Inc.com on how to focus on your target market.
Huge, profitable companies like Walmart and Amazon didn't start as the all-encompassing retailers we know today. Each debuted with a very specific focus that helped them find and nurture a strong customer base. Walmart originally catered to shoppers in rural areas where there was a dearth of options for low-cost goods; Amazon famously limited itself to just books for years before expanding into selling everything from DVDs to motorcycle gear.
The process of finding a target market and narrowing your company's focus to appeal to it directly often trips up new businesses, who find it difficult to turn down business opportunities when they arise. But trying to be all things to all people is a sure way to fail in the marketplace. Business experts offer up these tips to narrowing your target market:
The Dangers of Being Unfocused
Whatever market you're in, you've likely got a lot of competition and static standing between you and the consumer. Narrowing your focus to one specific demographic or slice of the marketplace gives potential customers a reason to notice you in the rest of the fray.
"If you're not differentiating yourself in the marketplace, what happens is the consumer looks at price as being the motivator," says Susan Friedmann, author of the books Riches in Niches and The Complete Idiot's Guide to Target Marketing. "And they look at the cheapest."
If you don't know specifically which customers you are speaking to, you are actually speaking to no one, says Tammy Lenski, a business mediation expert who has advised clients about successful business through target marketing.
"The big danger is that without a target market, it's like standing in a park shouting in the wind," she says. "When you have a target market, its like standing in a park and talking to a specific group of people."
That means you can't be afraid to exclude certain types of consumer from your marketing or to target your advertising at small groups. Some customers will feel left out, but those are the sacrifices necessary for a successful business, says Greg Head, founder and CEO of New Avenue, a strategic marketing firm.
"Focus requires exclusion," he says. "If you're selling everything, you actually mean nothing in the marketplace. Exclusion is fundamental to target markets."'
One way to hone in on a specific sector is to become an established resource in one area. Starbucks, for example, is able to charge premium prices for its coffee even though it also sells pastries, tea, and accessories, because it has positioned the company as an authority on good coffee.
"If you're an expert in your field, people will pay the price tag on whatever product and service you offer," Friedmann says.
You can build up credibility by offering information for free through your company's website or blog: things like tips, industry information, or niche data that will help consumers think of you as a reliable expert in that area, she says.
"Your credibility comes with giving away information," she says. "If this is the value I'm getting for free, what will I get if I pay for it?"
Entrepreneurs who do this successfully often start by following their passion, Friedmann says. She recalled a massage therapist who loved cycling and found a successful practice traveling with bike tours.
"If you can marry your passion with your profession, that's a really strong niche market," she says.
Experts give several methods for whittling down the vast expanse of the market to find your ideal target.
John Jantsch, creator of the Duct Tape Marketing System and Duct Tape Marketing Consulting Network, which trains and licenses small business marketing consultants, recommends a simple formula to identify who makes an ideal client: he ranks customers by profitability.
"In that step alone, they start identifying work they have taken or would take that they shouldn't be taking," Jantsch says.
Then he looks for clients that are already referring more business your way.
"They're referring business to you because they're having a great experience," he says. "They're happy, they're beyond satisfied and that's why they're referring business."
Friedmann says recommends looking for growth markets to identify burgeoning new areas that may not be claimed by existing businesses.
Lenski says some clients find their niche first by focusing on the areas in which they already have a strong interest, or by looking at markets that already know about you and your services. Then, look for areas of the marketplace where a gaping need exists that you can fill with your company's services.
As simple as it sounds, the name of your company is crucial when narrowing your market.
"I believe your name should say what you do," Friedmann says. "Using your own personal name, unless you're like Madonna, isn't going to cut it. It doesn't mean anything to anybody."
Words such as "branding coach" or "entertainment law" in your official business title help consumers quickly understand what you're all about.
Friedmann even created a new word to describe her focus: "nichepreneur."
You may have to change your branding strategy or marketing efforts to clarify your mission. Once you find your target, you'll definitely want to alter your advertising efforts to go after the places and media you use to generate new business.
"It's not just an advertisement that you do. It actually has to become part of everything you do," Head says.
Your marketing needs to highlight the specialization, which improves credibility, Head says.
"You've got to be perceived as the best at something," he says.
Then, once you've identified that base, use it to improve the business through things like social media and interactive marketing to find out more about what the customers are looking for, Lenski says.
"You've got to essentially engage that market. It's a two-way conversation," she says. "That's really where having a target market pays off."